Democrats Proposing $200Bln Tax Cuts For Married Couples

Author: Rob Wells, Dow Jones Newswires

Published: April 27, 2004

WASHINGTON -(Dow Jones)- House Democrats are proposing a bill with nearly $200 billion in tax cuts for married couples, the cost of which would be offset by rolling back tax cuts for the wealthy.

Rep. Charles Rangel, D-N.Y., is proposing the measure as an alternative to a Republican bill, scheduled for a House vote Wednesday, to provide tax cuts to married couples.

The Republican bill seeks to make permanent the "marriage tax penalty" relief in President George W. Bush's 2001 tax cut bill. Key provisions of the tax relief for married couples expire at the end of 2004.

The so-called "marriage tax penalty" refers to the higher taxes two-earner couples with similar salaries pay after they're married. By contrast, couples with disparate earnings enjoy a "marriage bonus" or a tax cut.

The Republican-proposed marriage tax relief includes reducing the 15% tax bracket for married taxpayers so it's no more than twice that of single taxpayers. The Republican bill carries a $96 billion price tag through 2014.

Rangel spokesman Dan Maffei said the Republican bill suffers from major flaws. For instance, the legislation won't make permanent relief lower income households receive through the Earned Income Tax Credit. These families generally don't earn enough to pay income taxes, yet they receive tax relief for them anyway through "refundable tax credits," a form of a rebate.

By 2010, some 3 million low and moderate-income families would be affected by the lack of married tax cut expansion for Earned Income Tax Credit recipients, according to the Urban Institute-Brookings Institution Tax Policy Center.

Maffei said the other flaw is the Republican bill lacks provisions to ensure families don't have their married tax break cuts eroded by the Alternative Minimum Tax. Some 13 million families will see these tax cuts reduced or eliminated due the lack of AMT protections in the Republican bill, Maffei said.

Rangel's proposal addresses both the Earned Income Tax Credit and Alternative Minimum Tax issues, which expands the bill's cost to $200 billion through 2014, Maffei said. Rangel would fully offset the bill's cost by rolling back the Bush tax cuts for people with incomes of $1 million and greater, Maffei said.

-By Rob Wells, Dow Jones Newswires; 202-862-9272; Rob.Wells@dowjones.com